Brierley Investments - Interim Results

RNS No 5397b
BRIERLEY INVESTMENTS LIMITED
4th March 1999


                             HALF YEARLY REPORT
                   FOR THE SIX MONTHS ENDED 31 DECEMBER 1998

                                    31 December 1998          31 December 1997
                                                    $thousands

NET TURNOVER                               1,056,137                 1,418,596

PROFIT (LOSS)                 
BEFORE TAXATION*                            (132,452)                  100,889

Taxation on profits                          (15,430)                  (17,495)

SURPLUS AFTER TAXATION                      (147,882)                   83,394

Minority Interests                           (30,408)                  (24,278)

Equity Earnings                               26,960                    61,562

PROFIT (LOSS) ATTRIBUTABLE
TO SHAREHOLDERS                             (151,330)                  120,678

*there were no extraordinary items
Amount absorbed by interim
dividend ($ thousands)                           N/A                   107,167

Rate of interim dividends cents per share        NIL                         4

Imputation tax credit cents per share            N/A                  0.492537

Supplementary dividend cents per share           N/A                  0.176471

Adjusted earnings cents per share               (5.1)                      4.4


1.  All amounts in New Zealand dollars or cents.

2.  This Report has not been audited.

3.  This Report should be read in conjunction with the Company's interim report
    to shareholders.

4.  A report to shareholders will be dispatched about 31 March 1999 and will be
    available to the public from the date at the Company's office 4th Floor,
    Stratton House, Stratton Street, London W1X 6BN

MB Horton 
Company Secretary


         STATEMENT OF ASSETS, LIABILITIES AND SHAREHOLDERS EQUITY

                                                  CONSOLIDATED

                                      At end of    As shown in     As shown in
                                   current half    last Annual       last Half
                                           year         Report   Yearly Report
   
                                        $NZ'000        $NZ'000         $NZ'000
  
CURRENT ASSETS
  (a)  Cash                           1,150,047        165,708         287,532
  (b)  Receivables                      341,909        295,114         295,323
  (c)  Investments                        2,327          2,632          10,414
  (d)  Inventories                      205,547        224,632         314,034
  (e)  Other                                NIL            NIL             NIL
  (f)  TOTAL CURRENT ASSETS           1,699,830        688,086         907,303
NON CURRENT ASSETS                    
  (g)  Receivables                          NIL            NIL             NIL
  (h)  Investments                    4,683,282      5,893,611       6,443,614
  (i)  Inventories                          NIL            NIL             NIL
  (j)  Property, plant and equipment  1,035,082      1,456,263       1,500,492
  (k)  Intangibles                      103,472        203,780         200,663
  (l)  Other                                NIL            NIL             NIL
  (m)  TOTAL NON-CURRENT ASSETS       5,821,836      7,553,654       8,144,769
  (n)  TOTAL ASSETS                   7,521,566      8,241,740       9,052,072
CURRENT LIABILITIES                   
  (a)  Accounts payable                 421,146        634,937         729,919
  (b)  Borrowings                       800,807      1,315,872         794,140
  (c)  Provisions                         4,406        (5,263)           8,906 
  (d)  Other                                NIL            NIL             NIL
  (e)  TOTAL CURRENT LIABILITIES      1,226,369      1,945,546       1,532,965
NON-CURRENT LIABILITIES
  (f)  Accounts payable                     NIL            NIL             NIL
  (g)  Borrowings                     3,448,578      2,944,928       2,918,357
  (h)  Provisions                        42,410         46,737          51,892
  (i)  Other                                NIL            NIL             NIL
  (j)  TOTAL NON-CURRENT LIABILITIES  3,490,988      2,991,665       2,970,249
  (k)  TOTAL LIABILITIES              4,717,347      4,937,211       4,503,214
  (l)  NET ASSETS                     2,804,319      3,304,529       4,548,858
SHAREHOLDERS EQUITY
  (a)  Share capital                  2,106,203      2,106,203       1,865,413
  (b)  Reserves   
           (i)  Revaluation reserve
           (ii) Other reserves         (620,720)      (594,408)       (574,335)
  (c)  Retained surplus 
         (accumulated deficit)        1,029,238      1,180,388       2,192,079
  (d)  Convertible Notes                    NIL            NIL         269,414
  (e)  SHAREHOLDERS' EQUITY 
       ATTRIBUTABLE TO MEMBERS  
       OF THE HOLDING COMPANY         2,514,721      2,692,183       3,752,571
  (f)  Outside equity interest 
       in subsidiaries                  289,598        612,346         796,287
  (g)  TOTAL SHAREHOLDERS EQUITY      2,804,319      3,304,529       4,548,858

Certain comparatives have been restated to correspond with current period
presentation.

                          Report to Shareholders

The last twelve months have probably been the most difficult in the Company's
history.  The dramatic decline in asset values, initially triggered by the
Asian economic crisis, was the catalyst for significant structural change to
BIL.  These changes were well documented in last year's annual report to
shareholders.

The abandonment of the Thistle Hotels sale process in August 1998 exacerbated
the effects of the Asian crisis.  In combination with a deteriorating New
Zealand dollar, which increased debt levels significantly but did not have a
uniformly similar effect on asset values (primarily because of the Asian
economic crisis), by 30 June 1998 BIL had an unacceptably high level of
gearing.

The Board has taken a number of steps to stabilise BIL's financial position
and begin restoring value to the key assets controlled by the Group.

These actions include:

*  The appointment of Sir Selwyn Cushing as Executive Chairman;

*  Embarking on an aggressive asset sales programme, which to date, including
   capital returns and special dividends, has realised almost $1.8 billion;

*  Negotiating a new senior debt financing package with the Group's banks;

*  Significantly reducing overhead costs;

*  Restructuring BIL's involvement on the boards of its key investments; and

*  Reviewing the Company's business and operating policies including its foreign
   exchange policy.

As a result of these actions BIL's financial position has improved considerably
and the Board is actively working on a business plan that will direct BIL's
investment activities for the foreseeable future.

While BIL's full recovery will take some time and there remains much work to
do, however this recovery is achievable and already well underway.


1998/99 Interim Result

BIL reported a net loss for the first six months of the 1998/99 financial year
of $151.3 million, almost entirely as a result of the Board's decision in the
third quarter of 1998 to realise its investment in the Central North Island
Forest Partnership (CNIFP). This action resulted in a loss of $139.9 million.

BIL sold its investment in the CNIFP to its joint venture partners.
Consideration for the sale was 46.6 million Fletcher Forests letter stocks and
cash of $26 million. In addition BIL was repaid debt from the partnership of
approximately $47 million.

BIL had provided for the diminution in value of the CNIFP investment in the $664
million general provision made in the 1997/98 accounts. In assessing the
provisioning for the half year result the Board believed that no provision
should be released. The Board will reassess provisioning in its entirety at 30
June 1999.

Excluding CNIFP, investment realisations over the period resulted in a surplus
of $33 million. Commentary on the asset sales programme follows later in this
report.

Based on the assumption that the recently announced sale of the Group's
shareholding in Sky City via an Instalment Receipt programme,is a success, the
Board is projecting a net surplus of at least $70 million for the full year.

During the period under review, the Board was most concerned with the condition
of the Group's balance sheet and in particular the level of debt within BIL. At
30 June 1998 BIL had total senior debt of $2.9 billion and breached one of its
lending covenants. This resulted from the decision by the Board to provision
asset values by almost $1.2 billion. To restore BIL's balance sheet the Board
and managmeent have focused on selling assets that do not meet the Group's
longer term investment criteria, the result being that at 31 December 1998 BIL's
senior debt position had improved to $1.8 billion.

Following the sale of the Group's shareholding in Sky City, the second capital
return payment from Thistle Hotels and the special dividend from James Hardie
Industries, BIL's net debt will fall considerably further again by 30 June 1999.

In December 1998 the Board announced a series of corporate objectives which
focused on achieving a sound balance sheet and finalising a new financing
package with senior lenders. We are confident that both objectives will be
achieved by the end of April 1999.

Investment Sales

The table below outlines the investments realised since 30 June 1998.

                    Asset Sales                             $ millions
                    
                    Ibstock                                        290
                    Beverly Prescott Hotel                          56
                    Austotel Trust                                 182
                    Creative Publishing                             41
                    De La Rue                                       34
                    CNIFP                                           73
                    Fairfax                                        702
                    W.D. & H.O. Wills                               84
                    Other Investments                              188
                                                  TOTAL:         1,649

Three asset sales in particular deserve comment:

*  John Fairfax Holdings - BIL's subsidiary Australian Consolidated Investments
   Limited (ACIL) received $702 million for its 24 percent stake in Fairfax.
   While this represents a modest surplus on both cost and market value at 30
   June 1998, this sale was the single largest by the Group since 30 June 1998.

*  Ibstock - The sale of Ibstock at 66 pence per share ($290 million), via ACIL,
   was extremely well transacted at a 53 percent premium over the market price
   of 43 pence per share prior to the annoncement of the sale.

*  The Austotel Trust - Austotel was acquired several years ago as a result of
   the rationalisation of BIL's New Zealand brewing interest. At the time of its
   acquisition Austotel had virtually no earnings and a portfolio of property
   assests that could not be regarded as particularly desirable. Over the
   course of the Group's involvement Austotel assets were improved considerably,
   higher earnings were generated and ultimately an excellent sale price of $182
   million was achieved.

In addition to these investments the Group disposed of a number of smaller
assets including Aetna Health, Australia-New Zealand Direct Line and W.D. & H.O.
Wills Holdings. None of these investments fit within the Group's longer term
investment strategy and shareholders can expect several other smaller
investments to be sold in the coming months.

As previously mentioned, in February BIL announced it would sell its
shareholding in Sky City via an Instalment Receipts programme. The sale is
expected to be finalised by 31 March 1999. Sky City has been an extremely
successful investment for BIL generating an internal rate of return of
approximately 39 percent.

While the sale proceeds will reduce debt further the primary reason for selling
Sky City was a belief by the Board and management that BIL could add little
further value to this investment and as a result it was an appropriate time to
realise its shareholding.

Key Investments

The Group's three largest investments - Thistle Hotels, Air New Zealand and
James Hardie Industries are continuing to report strong profit levels. The Board
is of the view that the current market prices of these investments do not
reflect the true value.

Thistle Hotels achieved a record profit before tax and exceptional items of
#86.6 million for the 1998 financial year, a 9.2 percent increase over the
previous financial year.

Turnover for the year increased to #322.5 million, up 0.9 percent from #319.7
million in 1997. This was impacted by the disposal of 34 hotels and on a
like-for-like basis turnover increased 4.6 percent driven by a 6.1 percent
increase in average room rates to #68.87 from #64.88. This more than offset a
0.4 percent fall in occupancy from 72.3 percent to 71.9 percent.

In the group's 24 London hotels, which generates 65 percent of total hotel gross
profits, turnover increased by 3.3 percent from #182.1 million to #188.1 million
and hotel gross profits increased by 7.2 percent from #84.2 million to #90.2
million.

Progress continues to be made in establishing Thistle as a strong full service,
4-star brand with hotels in key locations throughout the United Kingdom.

Following the sale of 34 smaller regional hotels the group now operates 61
hotels of which 44 carry the Thistle brand. Of the remaining hotels there are
plans to convert a further seven to the Thistle brand.

Air New Zealand recorded an interim after tax profit of $82.8 million for the
first half of the 1998/99 financial year, an increase of $0.8 million or 1
percent over the previous corresponding period. The result included an equity
accounted contribution from Ansett Australia of $37.1 million, which was a 16
percent increase over the first half of the previous financial year. Air New
Zealand's principal operating strategies are to:

*  allocate geater capacity to markets where economic performance and currency 
   strength provide better prospects for revenue growth;

*  strength regional networks and links with global alliance partners; and 

*  restrain costs against currency - including imported US dollar cost
   increases.

The airline continues to control its cost and retains a strong balance sheet
position allowing it flexibility to expand its route network where returns
justified.

Both Air New Zealand and Ansett Australia (50 percent owned by Air New Zealand)
gained full membership of the Star Alliance in March 1999. Both airlines expect
that membership of the Star Alliance will greatly enhance the choice and
convenience of inter-connecting services and facilities to their customers.

James Hardie Industries is enjoying strong revenue and earnings momentum,
primarily as a result of the performance of its United States fibre cement and
gypsum businesses.

For the first three quarter of the current financial year, James Hardie achieved
earnings before interest and taxation (Operating Income) of A$122.8 million from
continuing businesses, a 29 percent increase over the previous corresponding
period.

However James Hardie recognised an abnormal charge of A$123.5 million during the
year, mainly relating to expenses associated with the company's reorganisation
including the consequential writeoff of accrued tax losses. As a result BIL
realised an equity accounted loss on its share of James Hardie's earnings of
$22.8 million during the period.

The re-organisation of James Hardie is now almost complete and it is expected
that shares in James Hardie NV will begin trading on the New York Stock Exchange
in mid-March 1999.

Regardless of their market ratings, the strength of earnings of Thistle Hotels
and James Hardie has allowed these companies to return capital to shareholders.

Thistle Hotels will return approximately #85 million to BIL in two tranches. #43
million was returned in November 1998 with the balance expected in April 1999.
This obviously further improves BIL's debt position while also reducing the book
value of the Group's shareholding in Thistle.

As part of James Hardie's corporate re-organisation BIL subsidiary ACIL will
receive a special dividend of approximately $40 million.

While these key investments are fundamentally sound and encompass 58 percent of
the Group's assets, there are a number of investments receiving considerable
attention from the Board and management in order to restore shareholder value.

Vox Retail Group has been a problematic investment for BIL since its acquisition
and it is therefore pleasing to note a much improved result for this half year.
The progress alluded to in the last annual report has continued, with the $6.8
million loss for the half significantly reduced from the prior year's $34.4
million comparable loss. While favourable trading conditions assisted this
result it was pleasing to see the improved bottom line. Management continues to
work positively on the business and this good progress is expected to continue
through the second half.

Molokai Ranch reached an important milestone recently when the Water Commission
of the State of Hawaii granted the Ranch the right to drill a new well and draw
some 650,000 gallons per day, enough potable water to sustain the implementation
of the Ranch's master development plan and projected build out over the course
of the next 15 years.

The Board is reviewing the options which can improve the value of this
asset.

BIL's major assets in Asia are AsiaPower Limited and SEABIL Pacific Limited. BIL
is in the process of rationalising its investments in SEA Holdings and SEABIL
Pacific in conjunction with its partner SEA Holdings. In December 1998 BIL and
SEA Holdings agreed to split the assets of SEABIL Pacific with BIL acquiring
full ownership of Overseas Exchange Square, an 88,675 square metre, dual tower,
commercial property development in Chengdu, the capital city of Sichuan Province
in the People's Republic of China.

SEA Holdings will retain the remaining assets of SEABIL and has agreed to
repurchase BIL's 44.5 million shares in SEA.

AsiaPower's principal asset is a 110MW geothermal plant in Indonesia and the
project is scheduled to be completed in July 1999. AsiaPower is currently
negotiating with its various counterparties.  We will make a more detailed 
assessment of AsiaPower in the 1998/99 Annual Report.

Economic Value Performance

In the 1998 annual report the Board published a 'Shareholder Value Scorecard'
which showed that BIL's economic value was estimated to be 90 cents per share at
30 June 1998. Since then BIL's economic value has been influenced by the fall in
value of Thistle Hotels and James Hardie Industries:

*  Thistle Hotels share price dropped from #2.18 at 30 June to #1.07 at 31
   December. As a result the value of BIL's investment in Thistle fell by
   approximately $870 million over this period. Thistle's share price has 
   improved in recent weeks to around #1.40 recovering approximately $258
   million of market value;

*  James Hardie's share price fell from A$4.51 at 30 June 1998 to A$3.33 at 31
   December, wiping $152 million off the market value of the Group's
   shareholding. However, more recently the company's share price has recovered
   to a slightly higher level.

Air New Zealand's value has improved considerably in recent months.  The
airline's 'A' shares have risen by approximately 65 cents per share and its 'B'
shares by approximately 85 cents per share since the middle of December
restoring some $170 million in value.

Therefore, since 31 December there has been a material improvement in BIL's 
economic value.


Dividend

The Board has resolved not to pay a dividend for the first half of the year.
However, the Board is conscious of shareholders' expectations and will review a
dividend payment for 1998/99 later in the year.

BIL's wider capital structure and shareholder distribution policy, which may
include a share buyback programme, will be considered as an overall package when
the Board has completed its negotiations with senior lenders on a new financing
package.

Directors

At the annual meeting in November several changes were made to the Board as Ms
Fran Wilde, Mr Richard Longes and Mr Peter Dodd were not re-elected as
Directors.  The Board would like to extend its thanks to these individuals for 
their contribution to the Company.

Prior to the annual meeting the Board appointed Sir Selwyn Cushing and the
Honourable Philip Burdon as Directors.  Sir Selwyn Cushing was appointed
Chairman upon the closure of the AGM.

Sir Selwyn returns to BIL as Chairman and Chief Executive following his
retirement from the Company on 30 June 1993.  His is an extremely experienced
New Zealand business leader and the Board has every confidence that he will lead
BIL out of this difficult period and restore significant value to the Company.

Philip Burdon has a wealth of political and business experience both in New
Zealand and internationally and we welcome him to the Board.

Business Strategy

The Board has adopted both a short and medium term business focus, each having
the objective of restoring shareholder value.

The Board's priority is the completion of a re-financing package which will
place BIL on a firm financial and commercial footing.  At the same time the
Board will finalise the Group's business plan and we expect to communicate this
to shareholders before the end of April.

BIL has been working intensely on the refinancing package for some months.  To
put the complexity of this process in perspective, at 30 June 1998 there were in
excess of 70 lenders to BIL headquartered in a number of different countries.  
Currently this number totals 54 spread across thirty debt facilities and four
currencies.

Each lender has its own credit approval process and in most cases must submit
credit recommendations to an office in another country.  Despite these
complexities good progress is being made on the refinancing package.

Nevertheless an underwritten senior debt funding package is imminent and the
Board expects the resulting senior debt financing to be satisfactorily completed
by the end of April.

Overhead costs will continue to be reviewed to ensure BIL operates more
economically in the future.  Signficant progress has been made in reducing
operating costs with core overheads budgeted to reduce from $65 million in
1997/98 to $45 million in the current financial year.

Shareholders can expect to see BIL managing a portfolio of about a dozen
meaningful investments in the future and improving the value of these
investments is the basis for the Group's medium term plan.

The Group has actively restructured its involvement on most of the boards of
these companies to ensure the best mix of skills are available to assist these
businesses in achieving their objectives.

Th growth in value of investments like Thistle, Air New Zealand and James Hardie
Industries will immediately enhance BIL's own value.

The Board is confident that BIL's recovery is well underway. Debt is firmly
under control and the values of key assets are improving.  With the Board
uniformly focused on improving shareholder value, the Board believes
considerable value can be restored to the Group over the next twelve months.


END

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